The Case-Shiller data released earlier this week has sparked a great deal of discussion to say the least. 

The discussion has ranged widely, and has included discourses as to the methodology of the CSI, the applicability of the CSI, and of course there has been a great deal of discussion as to what the data means.  As is our practice, we’ve read a fair number of news sources and blog commentaries on the CSI data this week, and we’ve shared some thoughts on several blogs around.  It’s great to hear intelligent folks discuss their opinions and offer additional insights into key issues. 

We’ve been particularly entertained and inspired by an enterprising blog commentator over on BusinessWeek.com, who writes under the inspiring pen name of “BallBuster”.   This economic philosopher had posted the following first comment on the site in response to an article about the CSI data, and his second comment was posted in response to a post I later made.   

For all you suckers who thinks this real estate bust is about to end soon, consider this: these past and future rosy reports about the resurgence of the real estate market are coming from “economist” and “experts” who have substantial real estate interest directly or indirectly…I’ll tell you again: don’t buy real estate yet, because this real estate bust isn’t over until the real estate scamers (sic) bleed to death. The economy is in a deep troubling recession: high price of crude oil, high unemployment, housing construction bust, liquidity meltdown, and dismal consumer confidence are putting incredible downward pressure on inflated real estate prices for years to come. The Fed has failed to pull the ecomony (sic) out of its spiral nose dive…

I am FarkingMcGoofing, MD, PhD, FD, AID, Ditto-tee-D, with a Fiddle-tee-D. I am CEO of RedHerringDepartingMarkets.com. Check it out! man! Now I aint (sic) “harping on how bad it is,” but I is doing some needed “preaching and teaching on the fundamentals of market cycles and how to buy and sell no matter what cycle you’re in.” I is a flipper-gone-wild-real estate agent/investor, you know what I mean, man? I dice them, slice them, and mix them up real good for them folks at Wall St and the appraiser who help me scam everybody. And of course, I “preach and teach” everybody to buy real estate because nobody ever lose money “investing” in real estate. Let me preach you some truth: real estate is the greatest investment since sliced bread….

We’ve had a good laugh around the office, and attempted to post a follow-up comment praising BallBuster’s impressive credentials, encouraging him as he pursues his real estate career, and adding another thought about the Case-Shiller data.  (As of this morning our follow-up comment had not been posted.)

More seriously, you’d hope there aren’t many out there who are so disconcerted by the Case-Shiller data this week.  As a market data research team, we understand and appreciate the methodology of the Case-Shiller indexes, and in fact plan to write an extended feature about the indexes in an upcoming newsletter.  The Case-Shiller studies of the indexed markets are a very interesting and we think accurate portrayal of the status of those particular markets. 

Based upon our own research, however, we do take issue with the media’s and many experts’ extrapolation of the Case-Shiller data to any and every real estate market in the country. 

There is no question that a majority of markets in the country are in a real pickle when it comes to single family housing; that’s well reflected in the CSI data.  What’s not well reflected is that there are many markets that have very sound fundamentals (affordable housing, balanced inventories, and even stable or appreciating prices).  There are even more markets that have stumbled but not crashed – affordability is poor but improving, prices are rationally correcting in response to inventory and demand, new construction has been curtailed, and houses are still trading albeit at levels reduced from the peak but likely sustainable. 

Our point is that each and every market is unique, and must be carefully researched and analyzed to determine its true status.  One of our more intelligent data wonks on the team even suggests that in some of the CSI “terrible markets” he can find submarkets where single family valuations and fundamentals are in quite reasonable shape.  There are other asset classes that are doing very well in markets all around the country.   

We remain astounded to hear very little discussion about real estate market cycles – the simple fact that in a given market and for a given asset class valuations go up and valuations go down over time.  It has always been so, and will continue to be so.  We agree with those who suggest that it’s for the most part foolish to try and predict precisely when changes in the cycle will occur, but you can sure track the data and note the changes as they’re happening.  

That’s a big part of our mission, to track the data market by market, analyze it thoughtfully, and truly help good investors make better decisions. 

We’d like to even help the “Chicken Littles” out there. 

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